Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Title of Class Number of Shares Outstanding: Common Stock, par value $.001 per share 88,465,018 outstanding as of November 20, 2006.
EarthBlock Technologies, Inc. and Subsidiary
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2006
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
History:
The Company is a Nevada corporation incorporated on February 19, 1997, and is a reporting company with the Securities and Exchange Commission. It changed its name from L.L. Brown International, Inc. to Terra Block International Inc. on February 19, 2003.
On February 14, 2003 the Company entered into a Share Exchange Agreement with Terra Block Consolidated, Inc. The agreement provides for 100% of the shares of Terra Block Consolidated, Inc. to be acquired by the Company in exchange for shares of common stock of the Company, with the total issued and outstanding shares of the Company immediately after the closing and a 2 to 1 reverse split, of 10,000,018. The Company’s former subsidiary, LLBA has been spun off, leaving Terra Block Consolidated, Inc. as the sole operating subsidiary of the Company after effecting the agreement. The new combination also assumed $100,660 of accounts payable. The combination was accounted for as a reverse merger whereby the acquired company is treated as the acquiring company for accounting purposes.
Terra Block Consolidated, Inc. was incorporated in Nevada on May 30, 2002 and engages in the manufacture, distribution and application of technologically advanced building products through a licensing arrangement with Terra Block, Inc. Terra Block Consolidated, Inc. has the exclusive right to make, have made, use and sell Terra Block, Inc.’s products anywhere in the world. Terra Block, Inc. is a related party of Terra Block International, Inc. as a shareholder. The license agreements provide Terra Block Consolidated, Inc. the rights to all patented technologies, trade secret materials, copyrights, trademarks and all intellectual property of Terra Block Inc. The license is valid until terminated by Terra Block Consolidated, Inc. with 30 days advance written notice to Terra Block, Inc. or by Terra Block, Inc., if there is a material breach of the licensing agreement by Terra Block Consolidated, Inc. Under this agreement, Terra Block Consolidated, Inc. has the exclusive right to buy the license patent rights for $10,000,000. This agreement was terminated January 10, 2005.
On January 21, 2004, the Company entered into a Stock Purchase Agreement with an individual to sell 3,600,000 shares of common stock for $250,000. The purchaser also, is to receive redeemable common stock purchase warrants to acquire 1,000,000 shares of common stock at an exercise price of $.10 per share until January 20, 2009. In addition, 1,500,000 shares of common stock were issued as a commission in connection with this stock sale.
EarthBlock Technologies, Inc. and Subsidiary
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2006
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
On August 10, 2004, the Company issued 1,250,000 shares of common stock as compensation. The shares were valued at par value.
On October 4, 2004, the Company issued 300,000 shares of common stock as prepaid interest. The shares were valued at par value.
On October 29 and December 16, 2004, the Company entered into two stock subscription agreements with the same party. The agreements sold 10,000,000 shares of common stock at $125,000. At June 30, 2005 there is $0 due the Company from this transaction.
On December 16, 2004, the Company sold 1,200,000 shares of common stock for $15,000.
On February 11, 2005, the Company changed it name to EarthBlock Technologies, Inc.
On June 8, 2005, the Company sold 4,000,000 shares of common stock for $10,000.
On February 16, 2006, the Company sold 4,000,000 shares of common stock for $20,000.
On February 21, 2006, the Company issued 2,500,000 shares of common stock for services. The shares issued were valued at the market value of the stock on date of issue, total value $87,500.
On March 29, 2006, the Company sold 1,500,000 shares of common stock for $7,500.
On March 30, 2006, the Company sold 1,500,000 shares of common stock for $7,500.
On April 26, 2006, the Company issued 2,500,000 shares of common stock for services. The shares issued were valued at the market value of the stock on date of issue, total value $300,000.
On May 9, 2006, the Company issued 2,000,000 shares of common stock for services. The shares issued were valued at the market value of the stock on date of issue, total value $120,000.
On June 27, 2006, the Company issued 1,250,000 shares of common stock for services. The shares issued were valued at the market value of the stock on date of issue, total value $37,500.
EarthBlock Technologies, Inc. and Subsidiary
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2006
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
On June 27, 2006, the Company issued 11,400,000 shares of common stock to two note holders to stay their calling due the note. No formal agreement was signed. The shares issued were valued at the market value of the stock on date of issue, total value $342,000.
On August 1, 2006, the Company issued 2,000,000 shares of common stock to two individuals for services. The shares were valued at the market price of the stock on the date of the issue, total value $44,000.
On August 23, 2006, the Company issued 10,000,000 shares of common stock to three individuals for services. The shares were valued at the market price of the stock on the date of issue, total value $235,000.
Basis of Consolidation:
The accompanying consolidated financial statements include the accounts of EarthBlock Technologies, Inc. and Terra Block Consolidated, Inc. All significant inter-company accounts and transactions, if any, have been eliminated in consolidation.
Cash and Cash Equivalents:
For the purposes of the Statement of Cash Flows, the Company considers all short-term debt securities to be cash equivalents.
Cash paid during the period for:
| | | | | | | Since | |
| | 2006 | | 2005 | | Inception | |
| Interest | | $ | 0 | | $ | 0 | | $ | 0 | |
| Income taxes | | $ | 0 | | $ | 0 | | $ | 0 | |
Income Taxes:
The Company accounts for income taxes under a method, which requires a company to recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in a company’s financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statements carrying amounts and tax basis of assets and liabilities using enacted tax rates. The Company presently prepares its tax return on the cash basis and its financial statements on the accrual basis. No deferred tax assets or liabilities have been recognized at this time, since the Company has shown losses for both tax and financial reporting. The Company’s net operating loss carry forward at September 30, 2006 is approximately $2,300,000.
EarthBlock Technologies, Inc. and Subsidiary
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2006
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Use of Estimates:
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Development Stage:
The Company is classified as a development stage entity since it devotes most of its activities to establishing business and its principal activities have not yet commenced.
NOTE 2 - NOTES PAYABLE
Terra Block Consolidated, Inc.’s Notes Payable:
On October 15, 2002 the Company entered into a loan agreement with an individual to borrow $15,000. The terms of the agreement called for the principal sum of $15,000 to be paid on or before November 15, 2002 and an additional interest amount of $15,000 to be paid on April 15, 2003. The note is unsecured. A payment of $7,500 was made on February 3, 2004. The Company is in default under this agreement. The lender has not made formal demand for payment to date. The balance due on this note at September 30, 2006 and 2005, was $7,500 plus accrued interest.
On October 21, 2002 the Company entered into a loan agreement with an individual to borrow $10,000. The terms of the agreement called for the principal sum of $10,000 to be paid within 45 days, and an additional interest amount of $10,000 to be paid within 180 days. The note is unsecured. A payment of $5,000 was made on February 3, 2004. The Company is in default under this agreement. The lender has not made formal demand for payment to date. The balance due on this note at September 30, 2006 and 2005 was $5,000 plus accrued interest.
On December 19, 2002 the Company entered into a loan agreement with an individual to borrow $10,000. The terms of the agreement called for the principal sum of $10,000 to be paid on or before April 15, 2003 plus interest of $2,000. In the event that the principal has not been repaid by April 30, 2003, additional interest is owed equal to $200 per month thereafter. In addition 10,000 shares of common stock will be delivered as additional consideration. The note is unsecured. In addition to the issue of common stock, a payment of $5,000 was made on February 3, 2004. The Company is in default under this agreement. The lender has not made formal demand for payment to date.
EarthBlock Technologies, Inc. and Subsidiary
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2006
NOTE 2 - NOTES PAYABLE - CONTINUED
The balance due on this note at September 30, 2006 and 2005 was $5,000 plus accrued interest.
On December 19, 2002 the Company entered into a loan agreement with an individual to borrow $10,000. The terms of the agreement called for the principal sum of $10,000 to be paid on or before April 15, 2003 plus interest of $2,000. In the event that the principal has not been repaid by April 30, 2003, additional interest is owed equal to $200 per month thereafter. In addition 10,000 shares of common stock will be delivered as additional consideration. The note is unsecured. In addition to the issue of common stock, a payment of $5,000 was made on February 3, 2004. The Company is in default under this agreement. The lender has not made formal demand for payment to date. The balance due on this note at September 30, 2006 and 2005 was $5,000 plus accrued interest.
On December 20, 2002 the Company entered into a loan agreement with an individual to borrow $10,000. The terms of the agreement called for the principal sum of $10,000 to be paid on or before March 20, 2003 plus interest of $2,000. The note is unsecured. A payment of $5,000 was made on February 3, 2004. The Company is in default under this agreement. The lender has not made formal demand for payment to date. The balance due on this note at September 30, 2006 and 2005 was $5,000 plus accrued interest.
On December 23, 2002 the Company entered into a loan agreement with an individual to borrow $5,000. The terms of the agreement called for the principal sum of $5,000 to be paid on or before April 23, 2003 plus interest of $1,000. The note is unsecured. A payment of $2,500 was made on February 3, 2004. The Company is in default under this agreement. The lender has not made formal demand for payment to date. The balance due on this note at September 30, 2006 and 2005 was $2,500 plus accrued interest.
On January 15, 2003 the Company entered into a loan agreement with an individual to borrow $20,000. The terms of the agreement called for the principal sum of $20,000 to be paid on or before April 30, 2003 plus interest of $4,000. In the event that the principal has not been repaid by April 30, 2003, additional interest is owed equal to $400 per month thereafter. In addition 20,000 shares of common stock will be delivered as additional consideration. The note is unsecured. In addition to the issue of common stock, a payment of $10,000 was made on February 3, 2004. The Company is in default under this agreement. The lender has not made formal demand for payment to date. The balance on this note at September 30, 2006 2005 was $10,000 plus accrued interest.
EarthBlock Technologies, Inc. and Subsidiary
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2006
NOTE 2 - NOTES PAYABLE - CONTINUED
On March 14, 2003 the Company entered into a loan agreement with an individual to borrow $10,000. The terms of the agreement called for the principal sum of $10,000 to be paid on or before July 14, 2003 plus interest of $2,000. The note is unsecured. A payment of $5,000 was made on February 3, 2004. The Company is in default under this agreement. The lender has not made formal demand for payment to date. The balance due on this note at September 30, 2006 and 2005 was $5,000 plus accrued interest.
EarthBlock Technologies, Inc.’s Notes Payable:
On October 6, 2003 the Company entered into a loan agreement with an individual to borrow $20,000 at 10% interest due October 6, 2004. In addition 50,000 shares of common stock will be delivered as additional consideration. The note is unsecured. The Company has issued the common stock required under this agreement. The balance on this note at September 30, 2006 and 2005 was $20,000 plus accrued interest.
On October 6, 2003 the Company entered into a loan agreement with an investment consortium to borrow $12,500 at 10% interest due October 6, 2004. In addition 200,000 shares of common stock will be delivered as additional consideration. The note is unsecured. The Company has issued the common stock required under this agreement. The balance on this note at September 30, 2006 and 2005 was $12,500 plus accrued interest.
On October 6, 2003 the Company entered into a loan agreement with an individual to borrow $12,500 at 10% interest due October 6, 2004. The note is unsecured. The balance on this note at September 30, 2006 and 2005 was $12,500 plus accrued interest.
On April 30, 2004 the Company entered into a loan agreement with an Investment Company to borrow $100,000 at 10% interest due December 31, 2004. The note is unsecured. The balance on this note at September 30, 2006 and 2005 was $100,000 plus accrued interest.
On July 13, 2004 the Company entered into a loan agreement with an Investment Company to borrow $20,000 at 10% interest due January 15, 2005. The note is unsecured. The balance on this note at September 30, 2006 and 2005 was $20,000 plus accrued interest.
EarthBlock Technologies, Inc. and Subsidiary
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2006
NOTE 2 - NOTES PAYABLE - CONTINUED
On August 23, 2005 the Company entered into a loan agreement with an individual to borrow $35,000 at 12% interest due February 23, 2006. The note is unsecured. The balance on this note at September 30, 2006 and 2005 was $35,000 and $0 plus accrued interest respectively.
On August 23, 2005 the Company entered into a loan agreement with an Investment Company to borrow $15,000 at 12% interest due February 23, 2006. The note is unsecured. The balance on this note at September 30, 2006 and 2005 was $15,000 and $0 plus accrued interest respectively.
On June 29, 2006, the Company entered into a loan agreement with an individual to borrow $114,000 at 12% interest due June 29, 2006. The note is unsecured. The balance on this note at September 30, 2006 and 2005 was $114,000 and $0 plus accrued interest respectively.
On July 5, 2006, the Company entered into a loan agreement with an individual to borrow $24,000 at 12% interest due July 5, 2007. The note is unsecured. The balance on this note at September 30, 2006 and 2005 was $24,000 and $0 plus accrued interest respectively.
On July 20, 2006, the Company entered into a loan agreement with an individual to borrow $7,000 at 12% interest due July 20, 2007. The note is unsecured. The balance on this note at September 30, 2006 and 2005 was $7,000 and $0 plus accrued interest respectively.
On August 4 2006, the Company entered into a loan agreement with an individual to borrow $22,500 at 12% interest due August 4, 2007. The note is unsecured. The balance on this note at September 30, 2006 and 2005 was $22,500 and $0 plus accrued interest respectively.
On August 17, 2006, the Company entered into a loan agreement with an individual to borrow $15,000 at 12% interest due August 17, 2007. The note is unsecured. The balance on this note at September 30, 2006 and 2005 was $15,000 and $0 plus accrued interest respectively.
On June 29, 2006, the Company entered into a loan agreement with an individual to borrow $24,000 at 12% interest due December 29, 2006. The note is unsecured. The balance on this note at September 30, 2006 and 2005 was $24,000 and $0 plus accrued interest respectively.
EarthBlock Technologies, Inc. and Subsidiary
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2006
NOTE 2 - NOTES PAYABLE - CONTINUED
All notes except those dated June 29, 2006 or later are in default, payment was not made on notes stated due dates. The Company has not received any notices of default.
NOTE 3 - STOCKHOLDERS’ EQUITY
Preferred Stock:
At March 31, 2006 and December 31, 2005, the Company had 10,000,000 shares authorized of convertible preferred stock with a par value of $0.001 per share. Additional terms and conditions of the stock are to be set by the board of directors of the Company at the time of issue. On February 7, 2006, the Company established a Series A Preferred stock, consisting of two shares authorized and outstanding. The shares have no dividend rights, no liquidating preference, no conversion rights and no redemption rights. However, the two shares voting in aggregate, to vote on all shareholder matters equal to 60% of the total common share voting. There were 2 and 0 shares outstanding at September 30, 2006 and 2005 respectively..
Common Stock:
At September 30, 2006 and 2005 the Company had 100,000,000 shares authorized common stock with a par value of $0.001 per share. There were 88,465,018 and 44,815,018 shares outstanding at September 30, 2006 and 2005 respectively.
Warrants
On May 4, May 9, and June 22, 2006, the Company sold 1,000,000 Class A Warrants for $17,500. Total Class A Warrants sold were 3,000,000 for a total raised of $52,500. Class A Warrants exercise at a price equal to the average weighted price for the lowest eight days of the proceeding 20 trading days multiplied by 70% per share, with a minimum exercise price of $.007 and a maximum exercise price equal to the greater of $.025 or 50% of the computed price. Class A Warrants vest monthly and shall expire 90 days from the day first vested.
On July 17 2006, the Company sold 1,000,000 Class A Warrants for $17,500. Class A Warrants exercise at a price equal to the average weighted price for the lowest eight days of the proceeding 20 trading days multiplied by 70% per share, with a minimum exercise price of $.007 and a maximum exercise price equal to the greater of $.025 or 50% of the computed price. Class A Warrants vest monthly and shall expire 90 days from the day first vested.
EarthBlock Technologies, Inc. and Subsidiary
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2006
NOTE 3 - STOCKHOLDERS’ EQUITY - CONTINUED
On August 23, 2006, the Company sold 10,000,000 Class A Warrants for $50,000. Class A Warrants exercise at a price equal to the average weighted price for the lowest eight days of the proceeding 20 trading days multiplied by 70% per share, with a minimum exercise price of $.007 and a maximum exercise price equal to the greater of $.025 or 50% of the computed price. Class A Warrants vest monthly and shall expire 90 days from the day first vested.
All warrants were exercised as of September 30, 2006.
NOTE 4 - COMMITMENTS
The Company rents its present shared office space on a month to month basis. The Company expects to continue on that basis in 2006. Rent expense through September 30, 2006 and 2005 was $11,843 and $10,815 respectively.
NOTE 5 - DERIVATIVE LIABILITY ARRISING FROM WARRANTS
The Company accounts for debt with embedded conversion features and warrant issues in accordance with EITF 98-5: Accounting for convertible securities with beneficial conversion features or contingency adjustable conversion and EITF No. 00-27: Application of issue No 98-5 to certain convertible instruments. Conversion features determined to be beneficial to the holder are valued at fair value and recorded to additional paid in capital. The Company determines the fair value to be ascribed to the detachable warrants issued with the convertible debentures utilizing the Black-Scholes method. Any discount derived from determining the fair value to the debenture conversion features and warrants is amortized to financing cost over the life of the debenture. The unamortized costs if any, upon the conversion of the warrants is expensed to financing cost on a pro rata basis over the life of the warrant.
Debt issue with the variable conversion features are considered to be embedded derivatives and are accountable in accordance with FASB 133; Accounting for Derivative Instruments and Hedging Activities. The fairs value of the embedded derivative is recorded to derivative liability. This liability is required to be marked each reporting period. The resulting discount on the debt is amortized to interest expense over the life of the related debt.
EarthBlock Technologies, Inc. and Subsidiary
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2006
NOTE 6 - RELATED PARTIES
The Company owed its officers who are also shareholders $603,432 and $673,560 in accrued wages at September 30, 2006 and 2005 respectively. There are no other amounts due to or from these shareholder officers. The Company entered into employment agreements with its three officers. The agreements are identical. The agreements are for three years, call for annual wages of $120,000 each, with an annual inflation adjustment. The agreements also provide for twelve paid holidays, seven paid personal days and fifteen paid vacation days annually. In addition the Company is to provide $500,000 of group live insurance for each officer, at no cost. The agreements expired in June 2005.
NOTE 7 - GOING CONCERN
The Company has not generated significant revenues or profits to date. This factor among others raises considerable doubt the Company will be able to continue as a going concern.
The Company’s continuation as a going concern depends upon its ability to generate sufficient cash flow to conduct its operations and its ability to obtain additional sources of capital and financing. The accompanying consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty. Managements plans to relieve these problems by continuing to raise working capital either through stock sales or loans.
